Red Lobster creditors object to proposed bankruptcy settlement
Landlords and service providers demand repayment of debt and assurances of future performance
Bret Thorn
Some of Red Lobster’s landlords and other creditors have objected to the proposed settlements for outstanding debt as the struggling casual-dining restaurant chain seeks a buyer, according to recent court filings in the company’s bankruptcy case.
Red Lobster filed for Chapter 11 bankruptcy protection on May 19 and since then has closed more than 100 restaurants.
The objections were filed in advance of today’s deadline for potential bidders to buy the chain, according to the Orlando Business Journal.
At the time of its bankruptcy filing, Red Lobster had proposed it be sold to its creditors, led by Fortress Credit Corp., which largely refinanced Red Lobster’s debt in January and is therefore its largest creditor.
Once that sale is complete, the debt obligations would be transferred to the new owner, hence the flurry of recent objections as creditors seek to have their debts repaid.
Among the creditors who objected to the settlements is a group of landlords comprised of Surprise Towne Center Marketplace, Vestar Bowles Crossing, and CTC Gilbert Phase 1, who own restaurant spaces in shopping centers in Arizona and Colorado.
They said that they were owed a combined $47,348.98, and were proposed $0 in repayment. They said that they were due not only the more than $47,000, but also debts that have been accrued since the May bankruptcy filing.
Morguard Boynton Town Center Inc. also demanded payment in full of the $68,496.76 owed to it.
Payment Systems company ACI Worldwide also objected to its proposed cure amount, which is $15,201.67.
“According to ACI’s books and records … the accrued outstanding amount … is no less than $105,674.73,” the creditor said in its court filing, adding that, since ACI is continuing to provide its services, that debt is rising.
“ACI objects to any assumption and assignment of the Contract unless all amounts and other monetary obligations that become due … (a) are paid as and when due or (b) are paid in full in connection with an assumption and assignment of the Contract,” it said.
It also objected that Red Lobster had not established that the company’s future owner would provide “adequate assurance of future performance,” which it said was required under its contract.
Refrigeration and cold storage service provider Smart Care also objected to its cure of $0 on debt of “at least $223,375.83”, as did equipment provider and repair company REMCO, which is owed at least $235,177.58 and also was presented with a cure of $0. Similarly to ACI, they also demanded assurance of future performance.
Red Lobster declared bankruptcy after struggling for years. In its filing in May, CEO Jonathan Tibus, a restructuring expert who was hired to lead the company in April, accused the chain’s majority owner, seafood supplier Thai Union, of irregularities in regard to an “Endless Shrimp” promotion that reportedly resulted in an $11 million loss.
Contact Bret Thorn at [email protected]
